The method of valuing inventories at unit cost involves keeping records of them individually. When transferring inventories to production using this method, their actual cost is included in expenses.

The Russian Ministry of Finance recommends using this valuation method for inventories that cannot replace each other in the usual way, as well as for inventories used by the organization in a special manner (clause 17 of PBU 5/01). These financiers include precious metals, precious stones, etc.

It is also convenient to write off expensive goods that are sold in a single copy or in small quantities. For example, cars, art, jewelry. Practical accounting", N 7, 8, July, August 2007.

The organization sells expensive cars.

When selling a car, expenses include its actual cost. Since the accounting policy of the organization provides for the use of the valuation method for this group of goods - at the cost of a unit of inventories.

Writing off inventories at the cost of each unit allows you to obtain accurate information about the cost of assets sold. The reporting indicators generated using it are the most realistic, since they were obtained without any averaging or deviations. Accounting data with this method of assessing inventories can be used directly for management accounting.

The valuation method based on the cost of a unit of inventory can also be used in tax accounting when determining the amount of material costs when writing off raw materials and materials used in the production (manufacturing) of goods (performing work, providing services) and the cost of purchasing purchased goods when selling them.

Valuation method: at average cost

When writing off (dispensing) materials valued by the organization at average cost, the latter is determined for each group (type) of inventory as the quotient of dividing the total cost of the group (type) of inventory by their quantity, consisting respectively of cost and quantity by balance at the beginning of the month and by incoming inventories this month Order of the Ministry of Finance of the Russian Federation dated December 28, 2001 N 119n (as amended on March 26, 2007) “On approval of the Guidelines for accounting of inventories.” Thus, to determine the average cost for each group (type ) when writing off inventories at average cost, the following formula is used:

Ssr = (Cost + Spost) : (Cost + Kpost),

where Сср is the average cost of inventories;

Composition and Cpost - the value of the balance of inventories at the beginning of the month and those received for the month;

Cost and Kpost - the number of units of inventory remaining at the beginning of the month and capitalized for the month.

The product of the average cost obtained in this way for each group (type) of inventory by the number of inventories written off will give the value included in expenses. Practical accounting", N 7, 8, July, August 2007.

As of July 1, the balance of the inventory is 350 units, their actual cost is 88,970 rubles. The balances were made up of the receipts of five batches of supplies in the following sequence. The first batch received 50 units. at actual cost 245 rubles/unit, in the second - 70 units. at 251 rubles/unit, in the third - 80 units. at 254 rubles/unit, in the fourth - 80 units. at 257 rubles/unit, in the fifth - 70 units. at 261 rub/unit.

During July, 800 units of inventories were purchased for the amount of RUB 222,120. The supplies arrived in nine batches (hereinafter they are numbered from the sixth to the fourteenth). The dates of their receipts, unit cost and actual cost of each batch are given in table No. 1:

After one working day (July 2, 4, 6, 10, 12, 16, etc.), 80 units of inventories are transferred to production. In total, 11 transfers were carried out in a month.

(In this example and all the ones below:

When multiplying, differences in the values ​​of kopecks may occur. This is explained by the fact that the calculations were carried out with an accuracy of up to a tenth of it; It is considered that when goods are received and disposed of on the same day, their disposal first occurs, and then the new batch is capitalized.)

The total quantity and total value of inventories are determined as the combination of the quantity and value of inventories at the beginning of the month and those received during the month. These values ​​will be 1150 units respectively. (350 + 800) and 311,090 rub. (88 970 + 222 120). Based on this, the average unit cost is 270.51 rubles/unit. (RUB 311,090: 1150 units). Since 11 transfers of inventories were carried out in July, the total number of disposed stocks is 880 units. (80 units x 11). Therefore, the cost of inventories transferred to production during the month, included in expenses for ordinary activities, will be 238,051.48 rubles. (RUB 270.51/unit x 880 units).

The cost of the remaining 270 units. (1150 - 880) MPZ at the end of the month (at the beginning of August) - 73,038.52 rubles. (270.51 rub/unit x 270 units).

The average cost valuation method is the most common. With a large assortment of used inventories (sold goods) and provided they are purchased in small batches, it is quite difficult to track which batch each transferred (sold) unit of such inventory belongs to. This same method eliminates the required "tracking".

In the example, the average cost per unit of inventories was determined based on the average monthly actual cost, i.e. weighted scoring was used. The above-mentioned Methodological Instructions allow the use of another calculation option, when the actual cost of inventories is determined at the time of their release. In this case, the calculation of the average estimate includes the quantity and cost of inventories at the beginning of the month and all receipts until the moment of release. Since in this case the actual cost of a unit of inventories is determined each time at the time of their disposal, in other words, the calculation operation seems to “slide” from one retiring batch of inventories to the next, this option was called a sliding estimate. Practical accounting", N 7, 8, July, August 2007.

This article will be useful to all accountants, because inventories are used in almost all organizations. The organization must select and consolidate in its accounting policies a method for writing off inventories. Often the choice of method for writing off inventories is chosen intuitively. However, you must agree that every choice must be justified. The article will discuss the essence of methods for writing off inventories, options for using methods in accounting, tax and management accounting, and will also present the reasons for choosing one or another method for writing off inventories.

Let us recall that in accordance with PBU 5/01 “Accounting for inventories”, approved by order of the Ministry of Finance of Russia dated 06/09/2001 N 44n, inventories include: materials, goods, finished products.

Meanwhile, situations often arise in organizations when identical inventories are purchased at different prices from different suppliers; the amount of expenses included in the cost of inventories may also differ. What does this lead to? Often, when writing off inventories, it is impossible to determine exactly which batch these inventories are from, especially with a large range of materials.

Inventory is an object that is taken into account in accounting, tax and management accounting. For each type of accounting, a different method for assessing inventories upon disposal can be selected.

We evaluate inventory upon disposal in accounting

The assessment of inventory for accounting purposes is established in paragraph 16 of PBU 5/01, which establishes that “the application of one of the specified methods for a group (type) of inventories is based on the assumption of consistency in the application of accounting policies.”

What methods are used to write off inventories in accounting?

All types of inventories, except for goods accounted for at sales value, are valued in one of the following ways:

- at the cost of each unit;

- at average cost;

- at the cost of the first inventory purchases (FIFO method).

An organization can choose the method of writing off inventories independently, based on its preferences. So, let's consider the possibilities of using each method.

According to paragraph 17 of PBU 5/01, “inventories used by an organization in a special manner (precious metals, precious stones, etc.), or inventories that cannot normally replace each other, can be valued at the cost of each unit of such reserves." An example would be a situation where an organization sells antiques or expensive exclusive cars.

We propose to consider in more detail the assessment of inventories at average cost.

On July 1, 2014, there were 40 kilograms of chalk in the warehouse of Shkolny Dom LLC at a price of 30 rubles per kilogram (initial balance). Within a month, three batches of chalk arrived at the warehouse (see Table 1).

We determine the cost of chalk remaining in the warehouse at the end of the month when it is written off for production using three methods - at average cost, FIFO, at the cost of each unit.

Let's calculate the total cost and quantity of chalk purchased:

45 rub./kg x 60 kg = 2700 rub.

In total, there are 280 kilograms of chalk in the warehouse worth 10,700 rubles.

In a month, chalk was consumed in the amount of 200 kilograms. Let's calculate its cost.

Average cost method

When using this method, the average cost of one kilogram of chalk is determined; for this, the total cost of purchased chalk should be divided by its quantity:

10,700 rub.: 280 kg = 38.21 rub./kg.

Let's write off chalk for the amount:

38.21 rub./kg x 200 kg = 7642 rub.

Then in the warehouse of LLC "School House" there will be chalk left in the amount of:

10700 rub. — 7642 rub. = 3058 rub.

Now let's look at the FIFO method. According to paragraph 19 of PBU 5/01, “the assessment at the cost of the first acquisition of inventories (FIFO method) is based on the assumption that inventories are used within a month or another period in the sequence of their acquisition (receipt), i.e. . inventories that are the first to enter production (sale) must be valued at the cost of the first acquisitions, taking into account the cost of inventories listed at the beginning of the month. When applying this method, the assessment of inventories in stock (in warehouse) at the end of the month , is made at the actual cost of the most recent acquisitions, and the cost of goods, products, works, and services sold takes into account the cost of earlier acquisitions."

FIFO method

When using this method, chalk is written off from the first receipt, starting from the balance, according to the principle “first in, first out,” i.e., “first in, first out,” until the required amount is collected - 200 kilograms.

Balances in warehouse (initial balance):

30 rub./kg x 40 kg = 1200 rub.;

35 rub./kg x 80 kg = 2800 rub.;

40 rub./kg x 80 kg = 3200 rub.

In total, 200 kilograms of chalk worth 7,200 rubles were written off from the warehouse.

10,700 rub. — 7200 rub. = 3500 rub.

Another subtlety that few people know about. According to paragraph 78 of the Methodological Guidelines for Accounting for Inventory, the methods of average estimates (by average cost and FIFO method) of the actual cost of inventory can be carried out as follows:

— based on the average monthly actual cost (weighted estimate), which includes the quantity and cost of inventories at the beginning of the month and all receipts for the month (reporting period);

- by determining the actual cost of goods at the time of their release (rolling estimate), while the calculation of the average estimate includes the quantity and cost of goods at the beginning of the month and all receipts until the moment of release.

The difference in using a rolling estimate is only in the choice of the date on which the inventory is assessed, but we will get more accurate results. When using a weighted estimate, it is made at the reporting date, and when using a sliding estimate, it is made at the time of issue of goods.

What about tax accounting?

The procedure for applying methods for assessing goods when selling them is not disclosed in Chapter 25 of the Tax Code. The names of the methods are identical to the methods of applying the valuation of goods upon sale and other disposal in accounting. Consequently, on the basis of Articles 11 and 54 of the Tax Code, an organization can turn to the procedure provided for by the accounting legislation, which describes in detail how to apply these methods.

Tax accounting provides for four methods (methods) for valuing goods when they are sold, while in accounting there are only three.

— at the cost of the first acquisition (FIFO);

— at the cost of the most recent acquisition (LIFO);

- at average cost;

- at the cost of a unit of goods.

Currently, when writing off raw materials and materials for production (clause 8 of Article 254 of the Tax Code of the Russian Federation), when selling purchased goods (subclause 3 of clause 1 of Article 268 of the Tax Code of the Russian Federation), the taxpayer can use the LIFO method. This method is characterized by the fact that those inventory items that arrived last are written off first. But it should be remembered that from January 1, 2015, the legislator excludes this method from tax accounting (subparagraph “c”, paragraph 7, paragraph 9, article 1 of the Federal Law of April 20, 2014 N 81-FZ). Thus, the rules of tax accounting are brought into line with the provisions of accounting, because the LIFO method has not been used in accounting since January 1, 2008 (see Order of the Ministry of Finance of Russia dated March 26, 2007 N 26n “On Amendments to Regulatory Legal Acts on Accounting” ).

Let's use the initial data of example 1 and calculate the cost of consumed chalk using another method.

LIFO method

The essence of the LIFO method is that inventories are written off starting with the most recently received inventories.

45 rub./kg x 60 kg = 2700 rub.;

40 rub./kg x 100 kg = 4000 rub.;

35 rub./kg x 40 kg = 1400 rub.

In total, 200 kilograms of chalk worth 8,100 rubles were written off from the warehouse.

When using this method, there will be chalk left in the warehouse of Shkolny Dom LLC in the amount of:

10,700 rub. — 8100 rub. = 2600 rub.

Let's enter all the calculated data from examples 1, 2 and 3 into Table 2.

Having analyzed the data in the table, we can conclude that the FIFO method makes it possible to reduce the cost of production by reducing the cost of the materials used.

It should be noted that the average cost method is more traditional for domestic accounting.

Management Accounting. What do you need to know?

For management accounting purposes, materials valuation methods are used, both traditional and those that are rarely used. For example, the HIFO method (HIFO, or “highest in, first out”), when released into production, materials are first written off from the warehouse from the batch with the highest purchase price. After this batch is exhausted, the next batch, the price of which is the highest, is written off, and so on until all necessary materials are written off in the reporting period for production purposes. That is, when applying this method, material resources remaining in the warehouse at the end of the month are valued at the lowest purchase prices. The LOFO method (LOFO, or “lowest in, first out”), when materials are released into production, are valued first at the lowest prices. In other words, materials purchased at the lowest price are written off first. After this batch is exhausted, the next batch, the price of which is the lowest, is written off, and so on until the required amount of materials is written off in the reporting period. Consequently, when applying this method, the material resources remaining in the warehouse at the end of the month are valued at the highest acquisition prices. And these are not all the methods that are used in management accounting. What does an accountant-analyst focus on when choosing a method for writing off inventories in management accounting? It focuses on management goals in a particular organization.

What should we show in the financial statements when applying inventory valuation methods?

Now let’s determine how the influence of one or another cost write-off method is compared with the general task of reporting - to reliably present a picture of the organization’s financial position that best corresponds to reality. What should you pay attention to?

The assessment of financial reporting indicators should include the following elements:

- the balance of inventories at the end of the period, reflected as part of current assets in the balance sheet,

— the financial result of the period and the expenses of the period in the income statement,

— the amount of retained earnings (uncovered loss) in the liabilities side of the balance sheet.

Inventories are part of current assets, i.e. these are resources that should bring us income in the future.

The assessment of current assets determines the value of the total liquidity ratio (or total solvency), which is calculated as the ratio of the value of current assets and short-term liabilities. The reality of the assessment of current assets in this case is ensured by its maximum compliance with the current price level. Therefore, the most realistic assessment should be the FIFO method.

Profit is an indicator of the growth of an organization's capital that is not associated with an increase in its liabilities. The growth of capital in the organization’s reporting indicates either the possibility of expanding the scope of its activities, or the possibility of withdrawing from the organization’s circulation part of the funds “earned” by it without prejudice to its financial position, which it had at the beginning of the period for which the profit was calculated in accounting. The FIFO method, in conditions of rising prices, shows the maximum estimate of inventories and profits, and in conditions of declining prices for the acquisition of inventories, the minimum estimate of these indicators. The correspondence of the valuation of inventories in the balance sheet at the end of the reporting period with their “last” prices using the FIFO method brings their valuation as close as possible to the real state of affairs. And the larger the share of the “latest” prices in the calculation of the estimate of the remaining inventory, the more realistic it will be in this sense.

The advantage of the average cost valuation method is manifested to a greater extent if the cost of purchased inventories changes all the time. In such a situation, averaging the cost of write-off inventories allows you to “maintain” the amount of profit at an average level, thereby helping to avoid both unpredictably high values ​​that arise when prices drop sharply, and unexpected losses resulting from an increase in their value. Accordingly, the stability of the organization’s financial indicators will be maintained to a greater extent. To what extent and in what cases is this fair? The use of the average price method is suitable for situations where the accountant’s professional judgment allows him to assess the impact of changes in the purchase prices of current assets on reporting indicators as insignificant or insignificant.

The average cost valuation method can also be used in tax accounting (clause 8 of Article 254 of the Tax Code of the Russian Federation and subclause 3 of clause 1 of Article 268 of the Tax Code of the Russian Federation). Mentioning this method in both accounting policies will avoid the emergence of differences between accounting and tax accounting data.

The method of calculating the cost of each unit of inventory is used if necessary.

The LIFO method (remember that its use is only possible within the framework of tax and management accounting) in conditions of rising prices for purchased inventories forms a minimum estimate of inventories in the balance sheet at the end of the period, the maximum amount of expenses for the period in the income statement and a minimum estimate of the financial result ( profit or loss). In an environment of declining prices, LIFO gives us a maximum estimate of inventory on the balance sheet, a minimum estimate of period expenses, and a maximum estimate of financial result.

Thus, from the point of view of assessing current assets and calculating the solvency indicators of an organization, the FIFO method is the best assessment option. However, the choice of the FIFO method does not have such a positive impact on the assessment of the financial result. The write-off of inventories using the FIFO method is carried out in the sequence of acquisition, that is, at the “first” prices. This actually overstates the financial result compared to the inventory acquisition price level at the reporting date. The amount of profit, therefore, demonstrates the exaggerated capabilities of the owners to withdraw funds from the company’s turnover and/or expand business volumes. The organization looks exaggeratedly profitable.

In financial accounting, when choosing between the FIFO method and the average price method, one should not forget about the analytical meaning of profit. A significant increase in prices for inventories can lead to irrational withdrawal of funds from the organization’s turnover. Based on this, the average price method, when you have to choose between it and FIFO, in our opinion, is more consistent with the principle of prudence (conservatism).

Assessment of methods for writing off inventories and their impact on reporting

Write-off of materials at cost of each unit

The method of writing off materials at the cost of each unit is convenient for use in cases where an organization uses a small range of materials in production and you can easily track which batch the materials were written off from, and their prices remain fairly stable over a long period. In this case, accounting is kept for each batch of materials separately, and materials are written off exactly at the prices at which they were accepted for accounting.

In addition, this method should be used to evaluate the following types of MPN:

· materials that are used in a special manner - precious metals, precious stones, radioactive substances and other similar materials;

· Inventories that cannot be routinely replaced with each other.

Paragraph 74 of the Guidelines for accounting of inventories, approved by Order of the Ministry of Finance of the Russian Federation dated December 28, 2001 No. 119n, proposes two options for writing off materials at the price of each unit:

1. The unit cost includes all costs associated with the acquisition of these inventories. This method is used when it is possible to accurately determine the amounts of acquisition costs that relate to different materials.

2. A simplified method, according to which only the cost of inventories at contract prices is included in the unit cost, and transportation and other costs associated with their acquisition are accounted for separately and written off in proportion to the cost of materials written off for production at contract prices. This method is used when it is impossible to accurately determine what share of transportation and procurement costs relates to each specific batch of purchased materials.

Example.

At the beginning of the month, the organization had 120 kilograms of paint remaining in the amount of 3,600 rubles at actual cost.

Two batches of paint were purchased within a month:

The first batch is 150 kilograms, the cost of the batch is 3,200 rubles

Second batch - 200 kilograms, batch cost - 5,600 rubles

Transport costs amounted to 1000 rubles

Accounting for materials is carried out with the inclusion of transportation and procurement costs in the actual cost. For ease of calculation, all amounts are given without VAT.

The actual cost of paint is:

Balance at the beginning of the month: 3,600 / 120 = 30-00 rubles

First batch: (3,200 + 1,000) / 150 = 28-00 rubles per 1 kilogram

Second batch: (5,600 + 1,000) / 200 = 33-00 rubles per 1 kilogram

Used during the month:

100 kilograms of paint from the remainder at the beginning of the month

90 kilograms of paint from the first batch

120 kilograms of paint from the second batch

The cost of used paint is:

100 x 30-00 + 90 x 28-00 + 120 x 33-00 = 9,480 rubles

The main advantage of the method of writing off inventories at the cost of each unit is that all materials are written off at their actual cost without any deviations. However, this method is applicable only in cases where the organization uses a relatively small range of materials, when it is possible to accurately determine which materials are written off.

In cases where it is impossible to accurately track which materials from which particular batch were released into production, it is advisable to use one of the three methods described below.

Write-off of materials at average cost

In accordance with paragraph 18 of PBU 5/01, the method of writing off inventories at average cost is as follows. For each type of materials, the average unit cost is determined as the quotient of dividing the total cost of these materials (the sum of the cost of materials at the beginning of the month and those received during the month) by the quantity of these materials (the sum of the balance at the beginning of the month and those received during the month).

The cost of materials written off for production is determined by multiplying their quantity by the average cost. The cost of the balance at the end of the month is determined by multiplying the amount of material on balance by the average cost. Thus, the average unit cost of materials may vary from month to month. The balance of inventory accounts is reflected at average cost.

Example.

At the beginning of the month, the organization has 1,500 m of fabric remaining, the average cost is 95 rubles per 1 m. Within a month the fabric arrived:

1st batch: 1,000m at a price of 89-50 rubles per 1m;

2nd batch: 500m at a price of 100 rubles per 1m;

3rd batch: 1,200 m at a price of 80 rubles per 1 m.

During the month, 3,500 m of fabric were used to produce.

The average cost of fabric is:

(1500 x 95 + 1000 x 89-50 + 500 x 100 + 1200 x 80) / (1500 + 1000 + 500 + 1200) = 90 rubles per 1 m.

The cost of fabric written off for production is: 3,500 x 90-00 = 315,000 rubles.

Remaining fabric at the end of the month: (1,500 + 1,000 + 500 + 1,200) – 3,500 = 700 m.

Cost of remaining fabric at the end of the month: 700 x 90-00 = 63,000 rubles

To evaluate (write off) materials for production, you can use the average cost method (average price method). What is its essence? Let's look at it in more detail using an example.

The average cost write-off method is defined in clause 18 of PBU 5/01. Its essence is that the average cost per unit of each type of materials is calculated as follows: take the total cost of this type of materials at the beginning of the month and add the cost of the same materials received for a given month. Then we divide the resulting amount by the amount of materials, which is the sum of the balances of this type of materials at the beginning of the month and the amount of materials received for a given month.

When written off for production, the cost of materials used is determined by multiplying the amount of materials used by the average cost.

The balance of materials is determined as follows: multiply the amount of materials by the average cost.
Therefore, the average cost of materials may vary from month to month. The balance is reflected in balances at average cost.

Example.

LLC "Paint and Varnish Plant" as of October 1, 2014 has a balance of blue pigment in the amount of 1000 kg at an average cost of 190 rubles. for 1 kg. During the month, the receipts of blue pigment were:

October 2 - (1st batch) - 1000 kg for 200 rubles. for 1kg;
October 5 - (2nd batch) - 500 kg for 180 rubles. for 1kg;
October 24 - (3rd batch) - 300 kg for 190 rubles. for 1kg;

During October, 1300 kg of pigment was used in the production.

Let's calculate the average cost of pigment:

(1000 x 190 + 1000 x 200 + 500 x 180 + 300 x 190) / (1000 + 1000 + 500 + 300) = 191.79 rubles per 1 kg.

Let's calculate the cost of pigment written off for production:

1,300 x 191.79 = 249,327 rubles.

We calculate the remaining pigment at the end of October:

(1,000 + 1,000 + 500 + 300) – 1,300 = 1,500 kg.

The average cost of pigment at the end of the month is calculated as follows:

1,500 x 191.79 = 287,685 rubles

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FIFO method calculation example

Greetings, dear readers. Sometimes I fear for the future of our country, taking into account workers in some areas.

I rarely get this feeling, but still. One day a neighbor called me screaming for help. Not long ago she started working remotely as an accountant for a company. I don’t even know how she manages to hold on to her place there.

So, she calls and asks to tell her about the FIFO method and to give her an example of the calculation. For the first time I decided to help out a friend, but the situation was quite sad. I will share with you, friends, all the relevant information about this method.

FIFO method. Calculation. Example

The FIFO method (English FIFO, First In First Out, conveyor model) is a method of accounting for the inventories of an enterprise in the chronological order of their receipt and write-off.

The basic principle of this method is “first in, first out”, that is, the materials that arrive at the warehouse first will also be used first.

Inventories include current assets used in the company's production cycle: raw materials, materials, semi-finished products, finished products.

Inventories occupy a significant part of the company's current assets and require proper accounting. There are other methods of accounting for inventories in accounting:

1. at the cost of each unit;
2. at weighted average cost;
3. at the cost of last purchases (LIFO).

FIFO and LIFO. Advantages and disadvantages

The opposite of the FIFO accounting method is the LIFO (Last In First Out) method. The LIFO method is also called the barrel model, since the materials that were received last are written off first.

It should be noted that the LIFO method is used for tax accounting purposes only. The methods are also used in warehouse logistics, for example, the FIFO method is used for warehouse accounting of perishable inventories.

Evaluation example

Let's look at an example of using the FIFO method in practice. The figure below shows the initial data on the receipt and use of fabric inventories.

During the month of March, 270 meters of fabric were consumed; it is necessary to determine the fabric reserves for April.

When calculating using the FIFO method, it is necessary to use data sequentially, starting with the balances for the previous month. The total amount of fabric received for March was 13,400 rubles.

270 includes the balance for the previous month - 100 meters, 120 meters for the first receipt and 50 meters for the second receipt.

The cost of scrapped material is calculated as follows: 100 x 35 rub. + 120 x 40 rub. + 50 x 45 rub. = 10,550 rub.

The estimated cost of one meter of fabric using the FIFO method is: 10,550 / 270 = 39.07 rubles.

Calculation of the value of the balance at the end of the month: (3500+ 13400) – 10550 = 6350 rub.

It should be remembered that the first thing next month will be the materials from the second batch of fabric. At the end of March, the balance will include materials from the second and third batches of fabric, in quantities of 30 and 100 meters, respectively.

Source: http://site/online-buhuchet.ru/metod-fifo/

FIFO method in accounting

This method is used when the cost of inventories is based on the cost of materials that were received by the enterprise earlier.

For example, if an enterprise had several deliveries, then first the materials are taken into account in production at the price of the first delivery, then at the price of the second delivery, etc. sequentially.

An example of the use of FIFO in accounting is discussed below. So, let's evaluate inventories using the FIFO method.

Solution. With the FIFO method of accounting for inventory, we must, when sending materials to production, first send the materials that arrived to us earlier.

So, the first batch sent to production is 170 kg. At the beginning of the period we had a balance of 200 kg at a price of 50 rubles per kilogram.

Therefore, we take into account 170 kg at a price of 50 rubles per kilogram, which will be 170 * 50 = 8500 rubles.

The second batch sent to production is 160 kg. We have a balance from the beginning of the month of 30 kilograms at a price of 50 rubles per kilogram. And in the first delivery we received 100 kg of materials at a price of 20 rubles. per kilogram.

Which gives us 130 kg, but we need 160 kg. Therefore, we take another 30 kg from the second delivery at a price of 30 rubles. per kilogram (remember that in the second delivery there are (150-30) 120 kg of materials at a price of 30 rubles per kilogram.

So, the second batch sent to production will be taken into account for the amount = 30*50+100*20+30*30=4400 rubles.

Attention!

The third batch sent to production is 80 kg. We still have 120 kilograms left over from the second delivery at a price of 30 rubles per kilogram.

Therefore, 80 kg (the third batch sent to production) is taken into account at a price of 30 rubles, which will be 80 * 30 = 2400 rubles (remember that in the second delivery there remain (120-80) 40 kg of materials at a price of 30 rubles per kilogram.

The fourth batch sent to production is 40 kg. We still have 40 kilograms left over from the third delivery at a price of 30 rubles per kilogram.

Therefore, 40 kg (the fourth batch sent to production) is taken into account at a price of 30 rubles, which will be 40 * 30 = 1200 rubles.

In total, using the FIFO method, we send materials to production in the amount of 8500+4400+2400+1200=16500 rubles.

Let us summarize the data obtained in the table.

Source: http://site/www.goodstudents.ru/buh-uchet/682-fifo-buh.html

Cost calculation methods

If you are serious about getting into trading, you will have to choose which costing method to use.

Today, there are three legally permitted methods of assessment and calculation - by the cost of each unit of goods, by the average cost and by the FIFO method (English: “first in, first out”).

Each of them will give different indicators for business profitability, and therefore for tax and management accounting.

Such a seemingly simple question - at what cost to write off sold goods - can seriously affect how your trade will develop.

In this material we will look at all the presented methods for calculating cost, evaluate the advantages of each, and also tell you when it is better to use which one.

At the cost of each unit

As the name implies, this method assumes that the cost of each specific product is taken into account in the calculations. This system is used when trading unique and expensive goods, when accuracy is important.

For example, it is suitable for those who will sell cars, art or jewelry. It is logical that when a product is piecemeal, and one cannot easily replace another, exactly the price at which it was delivered is entered into accounting when writing off inventory items.

This method also assumes that it is always clear from which specific delivery the goods sold came from.

Average cost method

It is used more often than the previous one, and involves monthly calculation of the cost of goods using the arithmetic average. In this case, it does not matter from which specific delivery this or that product “left”.

This method of writing off inventory items is suitable for companies selling products for which piece accounting is not important. This could be, for example, stationery, clothing, shoes, toys, cosmetics and any other consumer goods.

The average cost method is especially beneficial for those goods for which the price is constantly changing, both up and down.

This method is the easiest to account for. The average cost of goods is calculated using the following formula:

[average cost of inventory items] = ([cost of inventory items at the beginning of the month] + [cost of inventory items received during the month]) / ([number of inventory items at the beginning of the month] + [number of inventory items received during the month])

And the cost of inventory written off per month is calculated as follows: [cost of written-off inventory items] = [average cost of inventory items] X [number of inventory items sold per month]

An example of calculation using the average cost method. At the beginning of the month, the Stationery store had 370 ballpoint pens left at a purchase price of 10 rubles.

Within a month, another 1000 pens were delivered in two batches - 500 for 9 rubles 50 kopecks and 500 for 9 rubles. We calculate the average cost:

• Cost of inventory items at the beginning of the month: 370 X 10 = 3700 (rub.)
• Cost of the 1st new supply of goods and materials: 500 X 9.5 = 4750 (rub.)
• Cost of the 2nd new supply of goods and materials: 500 X 9 = 4500 (rub.)
• Average cost of inventory items: (3700 + 4750 + 4500) : (370 + 1000) = 9.45 (rub.)

1100 X 15 – 1100 X 9.45 = 6105 (rub.)

Attention!

The advantages of the average cost calculation method are the stability of the price of materials sold and simplicity.

However, from a tax accounting point of view, it is not optimal in the case where, for example, you purchase the same pens from the same supplier, and he gradually reduces your prices. Let's consider the following option.

This is the most popular cost calculation method. It uses the queuing principle. It is assumed that the items that were delivered first are written off first.

Hence the name of the FIFO method (English: “first in, first out” - “first in, first out”).

However, unless the shelf life is important, it is not necessary to ship goods from an earlier delivery first - this is used as an assumption in the calculations.

That is, the cost of goods that are sold first is calculated at the price of the balances from the “oldest” delivery.

When the balances are quantitatively exhausted, inventory items are written off at the price of the next delivery, then the next one, and so on.

An example of calculation using the FIFO method. Let’s take our “Stationery” store with ballpoint pens and exactly the same situation as above.

We have 370 ballpoint pens for 10 rubles and are supplied in two batches of 500 pens - first for 9 rubles 50 kopecks, then for 9 rubles. 1100 pens sold for 15 rubles. We count the profit.

The first to go will be 370 pens for 10 rubles - that's 3,700 rubles. Then 500 pens cost 9.5 rubles each, which is another 4,750. There are 230 pens left, each worth 9 rubles, which is 2,070 rubles.

1100 X 15 – (3700 + 4750 + 2070) = 5980 (rub.)

As can be seen from the example of calculation using the FIFO method, the profit indicator in this case is lower than in the example with average cost. Accordingly, income tax will be less.

What's better?

Both of these methods work quite well. However, FIFO is considered more accurate than the average cost method.

It is especially beneficial in terms of taxes if the price of the goods you purchase is constantly decreasing.

Then the cost of the written-off goods will be the greatest, and the balance will be the minimum. Therefore, the answer to the question of which is better, FIFO or average cost, in most cases will be the first option.

In the warehouse program

Despite the fact that the FIFO method is quite simple in terms of understanding the principle of its operation, manually calculating the cost each time is very labor-intensive.

Especially if you have a small business, and you yourself are the director, the cashier, the accountant, and the chief buyer. It is much easier if you simply enter data on deliveries and sales and immediately get the result.

This is exactly how you can work with the MyWarehouse service. The program fully automates trading processes and itself calculates the cost of written-off goods using the FIFO method.

MyWarehouse calculates profitability for each product or product group, stores and displays current and historical balances, as well as many other data that may be useful.

This way, you save time and can be confident in the accuracy of the indicators on which you make decisions.

Company accounting policy

According to the law, the organization itself chooses how to calculate the cost of goods. It is important that the method you consider is necessarily reflected in the company's accounting policies.

This is stated in Article 313 of the Tax Code of the Russian Federation, as well as in paragraph 73 of the Methodological Instructions approved by Order of the Ministry of Finance of Russia dated October 28, 2001 No. 119n.

Changes to accounting policies can be made once a year. That is, you can deposit them earlier, but they will take effect according to the law next year - at the beginning of the new tax period.

The accounting policy is drawn up by an accountant and approved by the head of the organization.

For management accounting purposes, you are free to use any costing method. Our advice is to use the same one that is written down in your accounting policy - this way there will be less confusion.

Source: https://www.moysklad.ru/poleznoe/shkola-torgovli/metody-rascheta-sebestoimosti/

Let's look at the fifo method using an example

The FIFO method is a method of writing off materials in which previously purchased materials are written off first. As a result, materials are listed on the balance at a price that is most consistent with current prices on the market.

Let's look at a simple example. The following data is available on the remaining materials in the warehouse.

Data on remaining materials in warehouse

Let us determine the cost of materials supplied to the production of FIFO valuation methods.
(50 * 23 rub.) + (23 * 23 rub.) + (7 * 22 rub.) = 1833 rub.

Attention!

The balance of materials is: 35 pcs. 22 rubles each, 30 pcs. 24 rub. for the amount of 1490 rubles.

Let's look at a typical problem to reinforce the material. According to the accounting data of Start LLC as of 01/01/2013. The warehouse contains the following balances of materials according to account 10.1:

Remaining materials on account 10.1

01/05/2013 From the supplier Logos LLC, the warehouse of Start LLC received fabric - a tapestry in the amount of 500 meters at a price of 136.88 rubles. per meter, including VAT.

01/07/2013 Paid for materials from Logos LLC in the amount of 68,440 rubles. 01/12/2013 From the supplier Decor LLC, the warehouse of Start LLC received fabric - tapestry in the amount of 750 meters at a price of 138.65 rubles. per meter, including VAT.

01/18/2013 fabric - tapestry was released from the warehouse for the purposes of main production in the amount of 1480 meters.

According to the accounting policy of Start LLC, when materials are released into production or otherwise disposed of, they are assessed using the FIFO method.

Journal of business transactions

There are 480 meters in the warehouse at a price of 115 rubles, it remains to write off another 1000 meters, we take 500 at the price of the first delivery of 116 rubles and 500 meters from the last receipt at 117.5 rubles.

We get: 115*480 + 116*500 + 117.5*500 = 55,200+58,000+58,750 = 171,950 rub.

Thus, the cost of written-off materials will be 171,950 rubles. and the remainder of Start LLC will have 250 m of tapestry at a price of 117.5 rubles.

In addition to FIFO, there is the average cost method, which we will talk about in the following lessons. Until 2008, the LIFO method also existed, but it is no longer used.
Schematically, the differences between these methods look like this.

Source: http://site/uma-sovsem.net/razbiraem-metod-fifo-na-primere.html

Organizations must pay sufficient attention to costs. In order to justify expenses, it is necessary to be able to argue the feasibility of their occurrence.

The write-off of material assets is subject to certain rules.

Entities often use the FIFO method in accounting to determine the value of used inventories.

Write-off method

It is almost impossible to imagine a situation in which the purchase of homogeneous groups of goods necessary for work occurs identically over a long period of time.

As a rule, materials and raw materials come from several organizations and at different prices. At high turnover, it is not possible to track the cost of a specific unit used for production needs.

Legislation allows you to write off material assets as expenses as they are disposed of, using several methods.

According to PBU 5/01 “Accounting for inventories”, accounting allows the use of several methodologies:

1. Based on the cost of each unit. Suitable for accounting for expensive goods, when it is possible to track the disposal of each batch of materials and inventories.
2. At average cost. Total costs are determined as the ratio of the average price (based on the value of the balance and the amount received) to the total quantity, determined similarly.
3. The FIFO method means that the inventory that arrives first is used initially.

The FIFO rule is also often called the conveyor method. The name is an English abbreviation FIFO, which means First in first out. That is, “first in, first out.”

The method of writing off FIFO in accounting did not change in 2017. Homogeneous inventory continues to be exited in the order in which it was received.

Accordingly, materials from subsequent batches are not disposed of until the previous ones are completely used up.

The FIFO principle means that write-off for production or business needs occurs at the actual cost of inventories received first in line.

Thus, the cost of inventories received later and not used is included in the cost of closing balances.

FIFO principle in warehouse

Under certain conditions, the FIFO method is preferable in conditions of warehousing of goods.

Attention!

Considering that FIFO in accounting in 2017 is still the priority for writing off initial receipts, inventories leave the warehouse in a strict capitalization sequence.

Consignments of newly received homogeneous goods are not written off until the previous ones are used up.

The FIFO method is especially preferable when it comes to perishable goods. The chronological sequence of material write-offs must be confirmed by financial planning, which primarily affects the efficiency of the warehouse.

Downtime in production processes due to shortages of raw materials must be avoided. No less important is the task of minimizing losses due to untimely damage to goods.

When writing off materials, which is the FIFO method, the following features are distinguished:

• incoming goods are considered separately by batch;
• the cost of purchased batches of goods is determined;
• preventing product damage;
• minimizing losses through efficient use of inventories.

The FIFO method in relation to warehouse accounting is relevant for the following types of products:

1. perishable goods;
2. products with a limited shelf life;
3. goods that may become obsolete.

The FIFO method adopted in accounting, an example for writing off listed inventories, allows you to maximally avoid potential losses in the form of damage to inventories.

At the same time, in practice, the implementation of this principle can be quite difficult.

Large enterprises with high turnover require a developed inventory accounting system, including monitoring of movement and balances of materials.

Of great importance is the organization of the placement of goods and warehouse zoning, which makes it possible to ship materials that are in demand at the right time.

Calculation example

At the moment, the provisions of PBU 5/01 in relation to the issue under consideration have not changed.

The FIFO method in accounting in 2017 is also valid: costs incurred include the cost of the goods used that were originally purchased. The remainder of the inventory is the cost of inventories received later.

In accounting, the FIFO method is an example of the impact of changes in purchase prices on financial results.

Thus, when the cost of inventories of a homogeneous group increases, the initial low price will be included in the cost of production. Accordingly, product costs will be low and profits will increase.

The FIFO method, an example of which involves reducing purchase prices, will, on the contrary, increase the cost of production, reducing profits.

Example. The company is engaged in the production of bakery products. At the beginning of the period, the remaining flour is priced at 20,000 rubles. per ton was 2 tons, only 40,000 rubles.

Then the flour arrived in batches: 1st arrival 3 tons for 25,000 rubles; 2nd receipt of 5 tons for 30,000 rubles.

During the period under review, 4 tons of flour were consumed. The organization uses the FIFO method. An example of a write-off calculation would be as follows:

The cost of flour put into production is 2 tons for 20,000 rubles and 2 tons for 25,000 rubles. Total 2 x 20,000 + 2 x 25,000 = 90,000 rubles. The average cost of a ton of flour is 90,000/4 = 22,500 rubles.

The remaining flour is 1 ton for 25,000 rubles and 5 tons for 30,000 rubles. Total 1 x 25,000 + 5 x 30,000 = 175,000 rubles. The cost of the remainder is 175,000/6= 29,166.67 rubles per ton.

Based on the calculation results, the FIFO method allows you to initially take into account the goods that arrived first in time. The cost of purchasing subsequent MPZ will be taken into account as used.

Source: https://spmag.ru/articles/metod-fifo

Calculation and write-off of cost of inventories sold

According to paragraph 16 P(S)BU 9, to determine the cost of disposed inventories, an enterprise can use the following methods:

1. identified cost;
2. weighted average cost;
3. FIFO;
4. LIFO;
5. normative;
6. selling prices.

Previously, catering enterprises traditionally used the sales price method to determine the cost of goods sold and kitchen products.

But from January 1, 2003, a new version of paragraph 5.9 of Art. 5 of the Law on Profit determines that for tax accounting purposes, only the identified cost method or the FIFO method can be used.

Since the use of the identified cost method is very difficult in practice, today the vast majority of public catering enterprises have opted for the FIFO method for tax and accounting purposes in order to avoid double work.

And yet, we consider it appropriate to provide, within the framework of the “Accountant School,” a description of all six methods provided for by P(S)BU 9.

After all, be that as it may, changes in tax legislation do not “cross out” the current accounting standards.

Attention!

Identified cost method. The essence of this method is that accounting is kept separately for each unit of inventory, i.e. Each unit of inventory is retired at the same cost at which it was capitalized upon receipt.

The weighted average cost method is very convenient for enterprises that have a large range of inventories with constantly changing costs.

When writing off inventories for each homogeneous group, the average (weighted average) cost of a unit of inventory is determined by dividing the total value of the balance of such inventories at the beginning of the reporting month and the cost of those received in the reporting month by the total amount of inventories at the beginning of the month and received in the reporting month.

The FIFO method (“first in, first out”) is based on the assumption that inventories are disposed of in the order in which they arrived at the enterprise.

That is, it is believed that the inventories purchased first are also sold first.

Let's illustrate the use of the FIFO method with an example. Example 1. As of June 1, 2003, the balance of a certain type of inventory was 10 units at a price of UAH 10.00.

During the month, the enterprise received 260 units of this type of inventory: the first batch - 20 units. at a price of 15.00 UAH; second batch - 40 units. at a price of 12.00 UAH; third batch - 200 units. at a price of 20.00 UAH.

170 units left in a month. Let's determine the cost of disposed inventory and balance using the FIFO method (Table 1).

Table 1 easily shows the sequence of inventory write-offs using the FIFO method.

First of all, the balance at the beginning of the month is written off, then the receipt in the reporting month: first - the first batch, then the second, etc., until the total amount of inventory to be written off in this month is accumulated (in the example - 170 units) .

From the receipt of the third batch (200 units), exactly as much as was necessary was taken to ensure that the resulting quantity was 170 units.

It does not matter that virtually all 170 units. the inventory may well have only been “taken” from the last batch—for FIFO purposes, the inventory that was first received is considered to be the first to go.

From the above calculation it is clear that the use of the FIFO method in practice is quite labor-intensive. In this regard, we recall that accounting for the increase (loss) of inventories, in accordance with clause 5.9 of the Law on Profit, consists of comparing the book value of inventories at the end and beginning of the reporting period (quarter, half-year, 9 months, year).

Therefore, for tax accounting purposes, it is not important at what price the inventories were disposed of, but how they were valued at the end and beginning of the reporting period.

This allows you to use a simplified version of the FIFO method, which is based on the fact that inventory balances are valued at the cost of the most recent inventory receipt.

Example 2. According to the conditions of example 1, it will be sufficient:

• find the invoice for which the latest batch 3 was received;
• make sure that the actual balance of stocks of this type (100 units) does not exceed the last receipt (200 units at a price of 20.00 UAH);
• conclude that the cost of the remaining inventory of this type at the end of the period is UAH 2000.00. (100 units x 20.00 UAH).

Having transformed the well-known formula of the “commodity balance” (Balance at the end of the period = Balance at the beginning of the period + Income - Expense), we obtain a calculation formula for determining the cost of disposed inventory:

Expense = Balance at the beginning of the period + Income - Balance at the end of the period = 100.00 + 4780.00 - 2000.00 = 2880.00 UAH.

As you can see, the results are absolutely the same when using the original and simplified FIFO methods. Traditionally, when using the FIFO method, inventory is accounted for at original (purchase) cost.

Meanwhile, “simplified FIFO” can also be used in the case of accounting for goods and products at sales prices.

To do this, it is necessary to organize the accounting of trade margins for each batch of goods (for example, on each invoice, mark the amount of the trade margin).

And then, in a manner similar to that described above, you can determine the balance of trade margins attributable to the balance of goods, as well as the amount of trade margins on disposed goods.

Example 3. Suppose that in examples 1 and 2 the cost of goods is given at sales prices (subaccount 282 “Goods in trade”).

We also provide information on the size of the trade margin per unit of each batch of goods:

1. balance as of 06/01/2003 - 5.00 UAH. for 1 unit (5.00 x 10 = 50 UAH for the entire balance - the balance of Kt 285 “Trade margin” at the beginning of the month);
2. batch 1 — 7.00 UAH. for 1 unit (7.00 x 20 = 140.00 UAH for the whole batch);
3. batch 2 — 6.00 UAH. for 1 unit (6.00 x 40 = 240.00 UAH for the whole batch);
4. batch 3 — 9.00 UAH. for 1 unit (9.00 x 200 = 1800.00 UAH for the whole batch).

The total amount of the trade margin on goods of this type received during the month: 140.00 + 240.00 + 1800.00 = 2180.00 UAH. (loan turnover in subaccount 285 “Trade margin”)

Attention!

Knowing that the balance at the end of the month is 100 units. goods from batch 3, we determine the balance of trade margins at the end of the month for this type of goods: 9.00 UAH. x 100 units = 900 UAH. (balance Kt 285).

Now, using a formula similar to that given in example 2, it is easy to calculate the amount of trade margins on disposed goods: 50.00 +2180.00 - 900.00 = 1330.00 UAH.

Thus, the cost of goods disposed of during the month was: 2880.00 - 1330.00 = 1550 UAH.

The LIFO method (“last in, first out”) is based on the assumption that inventory is disposed of in the reverse order of its arrival. That is, the inventory that arrived last is considered to be disposed of first.

The standard cost method is usually used when estimating material costs as part of work in progress and finished goods.

According to this method, the cost of disposed inventories is determined based on the cost norms per unit of product (work, services).

Cost standards are set by the enterprise independently, taking into account normal levels of inventory use, labor, production capacity and current prices.

In order for standard costs to be as close as possible to actual costs, cost standards and prices must be regularly (for example, once a month) checked and revised by the enterprise.

Sales price method. The procedure for calculating the cost of goods sold and finished products using the sales price method is presented in Table 2.

Table 2 uses the following conventions:

• TN% - average percentage of trade margin;
• ТНн - balance of trade margins at the beginning of the reporting month (balance Kt 285 “Trade margin”);
• ТНп - the amount of trade margins attributable to goods (products) received in the reporting month (credit turnover on account 285 “Trade margin”);
• Tn - sales (retail) cost of the balance of goods (products) at the beginning of the reporting month (balance of Dt 282 “Goods in trade” and Dt 23 “Production”);
• Тп - sales (retail) cost of goods received in the reporting month (products for the kitchen) (debit turnover on accounts 282 “Goods in trade” and 23 “Production”, respectively);
• TNreal - the amount of trade margin attributable to goods sold;
• Treal - sales (retail) cost of goods sold;
• C/Creal - cost of goods sold.

Example 4. We use the data from examples 1 - 3 to calculate the cost of goods sold using the selling price method.

Let us remind you: as of June 1, 2003, according to accounting data, there were goods of a certain type in the amount of 100 UAH. in sales prices, incl. trade margin - 50.00 UAH; goods of this type were received during the month in the amount of 4780 in sales prices, incl. trade margin - 2180.00 UAH; goods of this type were sold during the month in the amount of UAH 2880.00. in selling prices.

Let's determine the cost of goods sold per month using the sales price method:

1. average percentage of trade margin: [(50.00 + 2180.00)/(100.00 + 4780.00)] x 100% = 45.70%;
2. trade margin on goods sold: 2880.00 x 45.70% / 100% = 1316.16 UAH;
3. cost of goods sold: 2880.00 - 1316.16 = 1563.84 UAH.

So, we have considered all 6 existing methods for estimating the cost of inventory disposal.

And now we will present possible correspondence of accounts for writing off trade margins and the cost of goods sold, as well as reflecting income and determining financial results from sales (see Table 3).

Possible invoice correspondence for writing off trade margins and cost of goods sold

It is also possible to pay by bank transfer, in which case the debit account will be 31.
The difference between the turnover in the debit and credit of account 791 represents the financial result of the enterprise’s activities.

Since subaccount 791 should not have a balance at the end of the month (or quarter), the resulting difference is written off to account 44.

If the debit turnover of account 791 is greater than the credit turnover, then the difference between them will be the amount of loss, and if vice versa, then the amount of profit.